Since this article is being addressed to longer term investors, I think you will likely appreciate the message within this write up.
While I analyze the metals markets on many time frames, this perspective is based upon a daily chart which has months to still play out.
But, before I move into my perspective of the market, allow me to summarize how I view the metals market in general so everyone can make the appropriate decisions for their own accounts, especially since some of you may not agree with the prism through which I view the metals. However, I can tell you that it is based upon much experience with the metals market.
So, let me back up to the last quarter of 2015. As the market was meandering in an overlapping manner into the lows we struck, I was noting that I was buying heavily into the complex as I expected that many stocks (as well as the metals) were completing long term bottoming structures in the last quarter of 2015. And, we all know what happened in the first half of 2016. The rally in early 2016 presented me with a nice 5-wave structure off a bottoming target we set well before we struck it. And, when the market bottoms where it should, and develops a 5-wave rally, I begin to view the market with bullish glasses rather than bearish ones.
It is for this reason that whenever the market presented us with a 3rd wave break out potential over the last 2 years, I outlined it as my primary perspective. As I have explained many times in the past, if the train is getting ready to leave the station, I want to be on it. And, although the market invalidated two break out set ups over the last 2 years, that did not discourage me.
Moreover, I was quite clear to all those that follow my analysis to refrain from using leverage for the “set ups.” Rather, I have cautioned many times about the evils of leverage until the market proves it’s in the heart of a 3rd wave.
Those that have heeded my words, and have steered clear of leveraged positions, have done quite well over the last three years. In fact, if we look at Barrick (GOLD) alone, you would see that it is up over 2X since we initially bought it back in 2015. How many major stocks do you own that have been up 2X over the last three years, even though they went sideways in a multi-year correction?
So, now the question is what does GOLD tell me about the rest of the metals complex? Well, it tells me that I want to remain on the long side of the market. You see, while the market may provide us with more consolidation, I have no reason at this time to re-consider my long positions until I see how GOLD rallies to the next target in the 27 region. And, with GOLD at 15.85 as I write this article, that means I am expecting another 70% appreciation in this stock before I have to re-evaluate my holdings. Moreover, since my purchase was from much lower levels, my stops are now set at the 11.50 region.
This means that GOLD is telling me that the metals complex is likely setting up for another strong run as we look towards 2020. And, ideally, I would like to see GOLD blow through that 27 region, on its way well over 38 in the coming year or two. (No, that was not a misprint).
So, as this market sets up its next bullish move higher, I think we can sit back, set our stops, and simply let the market run and work for us in the coming months to year ahead.
See chart illustrating the wave count on the GOLD.
Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets. He recently founded FATRADER.com, a live forum featuring some of the top fundamental analysts online today to showcase research and elevate discussion for traders & investors interested in fundamental rather than technical analysis.